(Adds comments from Pollack, source, background and ISDA
rejection of default consideration)
By Daniel Bases
NEW YORK, June 24 Holdout investors in Argentine
sovereign debt said on Tuesday they would discuss an
accommodation to let the government pay other bondholders facing
a potential default if negotiations to settle the legal dispute
have made good progress before July 30.
Lawyers representing the holdout investors, led by Elliott
Management's NML Capital Ltd and Aurelius Capital Management,
also said in a letter to U.S. District Judge Thomas Griesa there
were no grounds to grant Argentina's request to reinstate a
suspension of his order to make payment.
A bond payment of $900 million is due Monday to investors
who participated in two prior restructurings on the same terms
in 2005 and 2010. There is a 30-day grace period before an
actual default can be declared if there is no payment.
"If as July 30 approaches the parties have made good
progress but more time is needed, and Argentina has not taken
action to evade the Amended February 23 orders, Argentina and
the Plaintiffs will both have a strong motivation to work out a
consensual accommodation, on mutually agreeable terms," Robert
Cohen of Dechert, lead counsel to the holdouts, said in the
letter to Griesa.
Cohen went on to say this would allow the settlement process
to continue, allow Argentina to make the payment to exchange
bondholders within the grace period and give his clients
protections and compensation for the risk that the settlement
effort fails after Argentina makes its payment.
On Monday, Griesa appointed New York financial trial lawyer
Daniel Pollack as a special master to assist in the
Pollack would not respond directly when asked whether a
meeting with Argentine Economy Minister Axel Kicillof was
scheduled, saying: "I am making every effort to assist the
parties to reach a resolution of their litigation as rapidly as
possible. The issues are complex and very significant for all
A source familiar with the situation said Pollack has
already begun the process.
"There was a meeting today with both sides' lawyers and
Pollack, but it was strictly a get to know you gathering rather
than a substantive discussion on the issues," the source said.
Kicillof is due to speak at the United Nations in New York
on Wednesday about the debt situation, Argentina's U.N.
Ambassador Maria Cristina Perceval told Reuters. Kicillof will
also meet with lawyers for the Argentine government while in New
York, a government source in Buenos Aries told Reuters, but it
is unclear if he will also meet with holdout investors or
"Argentina's officials have yet to engage in any way with
the principals of its creditors, or even take steps to schedule
such a meeting," the letter from Dechert said.
Argentina's lawyers on Monday asked Griesa to suspend his
order, which would force the nation to either pay holdouts at
the same time it makes a payment on restructured debt or be
barred from paying anyone - thereby creating a technical default
even though the country has the cash to cover its debt.
According to the Dechert letter, Judge Griesa held a
conference call with the lawyers from both sides to discuss
Argentina's request to suspend, or stay, his order.
Griesa's order was upheld after the U.S. Supreme Court on
June 16 denied the government's request to hear an appeal on the
injunction put on financial institutions from transferring
payments by the government through the U.S. banking system.
The plaintiffs, who have waged battle with Argentina in the
New York courts, won a 2012 judgment for $1.33 billion. They
claim in the letter to Griesa that with past due interest, the
award would be approximately $1.65 billion by June 30.
Argentina claims that if it pays the holdouts it would face
a potential demand of up to $15 billion from other holdouts not
involved with the case, an amount representing more than half of
the government's $28.5 billion in foreign currency reserves.
But analysts say the $15 billion figure appears too high.
Moody's Investors service said the claims could rise to $7.5
billion if all the unrestructured debt under New York law is now
claimed. That figure rises to $12 billion, Moody's said, if all
holdout claims in U.S. dollars and euros were to seek payment.
Roughly 93 percent of the bondholders who owned the
approximately $100 billion in sovereign debt that Argentina
defaulted on in 2001-2002 accepted the restructuring for less
than one-third the original value of the bonds.
Argentina's restructured U.S. dollar denominated debt traded
mixed on the Tuesday after rallying on Monday to the best levels
Par bonds maturing 2038 edged 0.017 points higher in price
to bid 48.42, with the yield down to 9.07 percent.
. Discount bonds maturing 2033 were off 0.79 points
to bid 87.43, lifting the yield to 9.94 percent, according to
Thomson Reuters data.
Argentina's share of the JPMorgan Emerging Markets Bond
Index Plus underperformed the index with yields over
comparable benchmark U.S. Treasuries wider by 5 basis points to
674 basis points and total returns for the day down 0.17
Separately, the International Swaps and Derivatives
Association (ISDA) on Tuesday refused to consider whether
default could be declared based on statements last week by
Kicillof that Argentina would not pay its obligations and would
seek other ways around Griesa's order.
(Additional reporting by Jonathan Stempel, Louis Charbonneau,
Joseph Ax, IFR's Davide Scigliuzzo in New York, and Walter
Bianchi in Buenos Aires; Editing by Tom Brown and Cynthia